SSF Realisations Ltd v Loch Fyne Oysters Ltd & Ors [2020] EWHC 3521 (Ch) (21 December 2020)

SSF Realisations Ltd v Loch Fyne Oysters Ltd & Ors [2020] EWHC 3521 (Ch) (21 December 2020)

The management charge was not a genuine liability but a voluntary distribution to the shareholder, LFO, as there was no prior obligation or agreement for reimbursement. The distribution (dividend plus management charge) exceeded the company's available distributable profits as shown in the relevant (October 2011) management accounts, which themselves overstated profits due to accounting errors. The distribution was therefore unlawful under Part 23 of the Companies Act 2006 to the extent it exceeded available profits. LFO and the directors who approved the distribution are liable for the unlawful amount.

Citation
[2020] EWHC 3521 (Ch)
Parties
Claimant: SSF Realisations Limited (In Liquidation); First Defendant: Loch Fyne Oysters Limited; Second Defendant: Robert Harvey Craig; Third Defendant: Timothy Lucas; Fourth Defendant: Richard Julian Organ; Fifth Defendant: Bruce Charles Davidson; Sixth Defendant: Stephen Alexander Sutherland
Jurisdiction
England and Wales
Judgment Date
21 December 2020
Procedural Posture
Company Law Claim (unlawful Distribution) / High Court (chancery Division) Judgment After Trial
Outcome
Claim allowed in part
Legal Topics
Unlawful Distribution, Directors' Duties, Shareholder Liability, Disguised Distribution, Companies Act 2006 Part 23, Section 847 Liability, Management Charge, Dividends, Intercompany Transactions
Company Law Insolvency Unlawful Distribution Directors' Duties Shareholder Liability Disguised Distribution Companies Act 2006 Part 23 Section 847 Liability +3 more

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Parties

SSF Realisations Limited (In Liquidation)

Claimant

Loch Fyne Oysters Limited

First Defendant

Robert Harvey Craig

Second Defendant

Timothy Lucas

Third Defendant

Richard Julian Organ

Fourth Defendant

Bruce Charles Davidson

Fifth Defendant

Stephen Alexander Sutherland

Sixth Defendant

Procedural Posture

Company Law Claim (unlawful Distribution) / High Court (chancery Division) Judgment After Trial

Legal Issues

  1. 1 Whether the management charge and dividend constituted an unlawful distribution under Part 23 of the Companies Act 2006
  2. 2 Whether the management charge was a disguised distribution
  3. 3 Whether the distribution was made out of profits or capital

Ratio Decidendi

The management charge was not a genuine liability but a voluntary distribution to the shareholder, LFO, as there was no prior obligation or agreement for reimbursement. The distribution (dividend plus management charge) exceeded the company's available distributable profits as shown in the relevant (October 2011) management accounts, which themselves overstated profits due to accounting errors. The distribution was therefore unlawful under Part 23 of the Companies Act 2006 to the extent it exceeded available profits. LFO and the directors who approved the distribution are liable for the unlawful amount.

Court Disposition

Claim allowed in part

Orders

  • Declaration that the management charge and dividend together constituted an unlawful distribution to the extent of £316,859
  • Order that Loch Fyne Oysters Limited repay the unlawful distribution to the company